Showing posts from February, 2019

The probability of a stock going up or down

"What is the probability of a stock's price going up vs going down at any given time?" The answer depends on how you are looking at this: (i) if you are looking purely at the very next second with no additional information, there are three ways the stock could go: up, down or flat (no change). (ii) if you are looking at buying a stock at any given point in time but then holding it for a period of time, historical data starts to indicate that the odds favour up over down. A while back I ran some stats on my domestic equities market (Australia). I found that 64% of industrial stocks (a broad category that excludes resources plays but includes most other sectors including tech and financials, achieved a positive return in the five years to May 20, 2018. The chart below sets out the distribution of returns. But that is just one time period in time. Using US data, alpha architect ran a more detailed study that you can read here . If you look at market returns rat

Ten Thousand Words - February 2019

Apparently , Confucius didn’t say “One Picture Worth Ten Thousand Words” after all. It was an advertisement in a 1920s trade journal for the use of images in advertisements on the sides of streetcars. Even without the credibility of Confucius behind it, we think this saying has merit. Each month we share a few charts or images we consider noteworthy. This month, we observe earnings expectations for ASX listings drift into the February reporting season; Nomura shows us how US equities have performed after dropping at least 17.5% (they have performed well); Merrill Lynch's February fund manager survey shows the biggest allocation to cash since 2009; Merrill also shows us big things are ahead for the "Internet of Things", while from Goldman Sachs we get a look at  the scale of the leading public cloud operators relative to their growth rates; and finally we take a look at venture capital deal activity courtesy of KPMG (and find that angel/seed deal volumes have declined pr

Cannabis stocks weren't smoking in 2018

From time to time we've published an index on cannabis stocks and on other speculative thematics - lithium, China consumer plays and cryptocurrency stocks. We had another look at these indices, based on the average share price moves of baskets of stocks exposed to the relevant themes, to provide a client with some perspective on how they have performed compared to the continually bubbly narrative of newsletter writers. Figure 1: Average share price performance of ASX-listed cannabis stocks since Jan 2016 Source: Sentieo, Equitable Investors On our calculations, cannabis stocks fell 36% in 2018 - but that was better than cryptocurrency stocks (down 62%), lithium stocks (down 53%) and China consumer stocks (down 40%). These stocks tell the story of market sentiment – they will run very hard when sentiment is strong and they will have the biggest declines when people start to worry. Figure 2: Speculative thematic indices peaked in Dec 2017/Jan 2018


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